Formal notification of intended decision on the Other Systemically Important Institutions (O- SIIs) in Greece Notifying national authority 1.1 Name of the notifying authority Bank of Greece (BoG) 1.2 Name of the macro prudential O-SIIs identification and setting O-SIIs buffers measure that is notified 1.3 Date when the decision referred The BoG intends to decide on the designated (for year 2015) O- to in Article 5 of the SSMR shall SIIs and the corresponding O-SIIs buffers by the end of 2015. be taken Description of the measure 2.1 Please provide a detailed The measure refers to the identification of the O-SIIs in Greece description of the measure, and to the calibration of the capital buffers for the identified including calibration and the institutions. main parameters The identification has been carried out using the criteria outlined and defined in the methodology of the EBA’s Guidelines (EBA/GL/2014/10. We applied the mandatory indicators. The definition of the mandatory indicators in each criterion was based on FINREP data with the exception of domestic payments transactions where TARGET2 data was used. BoG did not use any of the optional indicators presented in Annex 2 of the EBA Guidelines. Institutions with a score equal or higher than 350 basis points were designated as an O-SII. 2.2 Please specify the legal basis The identification of the O-SIIs and the O-SIIs buffers have been and process of implementation developed in accordance with Article 131 of Directive of the measure 2013/36/EU (CRD IV). Transposition to the Greek law of CRD IV has been carried out with Law 4261/2014 (Article 124 for the O- SIIs). The identification of the O-SIIs and the setting of O-SIIs buffers will be implemented by a legal binding act (BoG’s Executive Committee Act). 1 2.3 Please describe in detail which The EBA methodology has been applied to compute the scores institutions/exposures will be for all the institutions operating in Greece, using consolidated covered by the measure, data in accordance with this methodology. including whether the measure For materiality reasons we excluded from our analysis the would be applied at cooperative banks sector and three small commercial banks since consolidated or solo level and they have negligible market shares (combined market share less possible exemptions than 1%). Following the EBA/GL/2014/10 four (4) institutions with scores equal or above 350 basis points have been identified as O-SIIs: o National Bank of Greece o Alpha Bank o Piraeus Bank o Eurobank Ergasias As the GLs do not specify a buffer calibration methodology, the BoG has developed an internal methodology designed to translate the systemic importance of the institutions into O-SII buffer. Taking into consideration the structure and the characteristics of the Greek banking system, the methodology is rather simple and based on clusters. Against this background, and taking into account the scores obtained in the December 2014 identification process, we set up five buckets as follows: i. Bucket 1 encompasses scores from 350 to 699 basis points; ii. Bucket 2 encompasses scores from 700 to 1499 basis points; iii. Bucket 3 encompasses scores from 1500 to 1999 basis points; iv. Bucket 4 encompasses scores from 2000 to 3499 basis points; v. Bucket 5 encompasses scores > 3500 basis points; Given the scores underlying each Greek O-SII, bucket 4 corresponds to all of them: O-SIIs distribution by buckets and respective buffers Buckets Buffers 5 >= 3500 2.00% 2 4 2000-3499 1.00% 3 1500-1999 0.75% 2 700-1499 0.50% 1 350-699 0.25% Capital buffers are phased in the next six years, as follows: 1 1 1 1 Jan 1 Jan 1 Jan 1 Jan Institutions Jan Jan Jan 2019 2020 2021 2022 2016 2017 2018 National Bank of 0.0% 0.0% 0.0% 0.25% 0.50% 0.75% 1.00% Greece Alpha Bank 0.0% 0.0% 0.0% 0.25% 0.50% 0.75% 1.00% Piraeus 0.0% 0.0% 0.0% 0.25% 0.50% 0.75% 1.00% Bank Eurobank 0.0% 0.0% 0.0% 0.25% 0.50% 0.75% 1.00% The additional capital requirement is calculated on the basis of the institutions’ total risk exposures and must be covered by Core Equity Tier 1 capital (CET1 capital). This requirement must be fulfilled as from 1st January 2016 in line with the above phase-in. 2.4 On what date does the measure The intended date of activation is 1 January 2016 come into force? 2.5 Until when will the measure The BoG shall review annually the identification of the O-SIIs, as presumably be in place or when per CRD IV, art. 131, par. 12, and report the result to the would it be reviewed? Commission, the ESRB and EBA and disclose the updated list of identified O-SIIs. According to CRD IV provisions (article 131, par.6), when requiring an O-SII buffer to be maintained, the O-SII buffer should be reviewed by the BoG at least annually. In case of significant restructuring processes, namely mergers and acquisitions, the calibration process should be reviewed after those processes. Reason for the activation of the measure 3 3.1 Please give the description of The recent crisis has shown the failure of a systemically important the macroprudential risk in the institution may have severe consequences in the financial system financial system to be and the real economy. addressed by the proposed The build-up of the O-SII buffer will increase resilience of banks macroprudential measure. and reduce moral hazard arising from the “too big to fail” issue. Please specify the reasons why In the case of Greek Banks the four identified institutions changes in the intensity of represent 95% of the domestic market thus it is necessary to systemic risk could have serious introduce positive O-SII capital buffers for all of them. negative consequences for financial stability at national level 3.2 Please describe the indicators The identification is carried out using the EBA Guidelines on the basis of which the (EBA/GL/2014/10). Institutions with a score equal or higher than measure is to be activated. 350 basis points were designated as O-SIIs. Please provide the data the The scores per bank and category can be found in the ANNEX. decision is based on (preferably an Excel-file) 3.3 If applying a measure under Not applicable Article 133 CRD or 458 CRR, please explain why the measures mentioned in Article 133(11)e and Article 458(2)c are not sufficient to adequately address the macroprudential risks identified and why the measure is deemed to be suitable, effective and proportionate to address the situation Impact of the measure 4.1 Please provide your assessment The higher capital requirements following the implementation of of the effects of the measure on O-SII buffer will increase the resilience of systemically important the domestic banking system, banks. At the same time, the envisaged phase-in period should the real economy and financial give O-SIIs sufficient time to adapt to the additional requirements stability in your country without negative spill overs to the real economy. The temporal deferment in the application of buffer rates relates to the projected macroeconomic conditions, the role of the Greek banks in the revival of the economy and the need to boost 4 lending activity. The phase-in period is also informed by the recent Comprehensive Assessment exercise the timeline of which expands up to December 2017 and banks are being recapitalized to cover the shortfall under the adverse scenario at a minimum hurdle rate of 8%. 4.2 Referring to your country's The Greek banking system is rather concentrated (4 domestic specific characteristics, what is banks holding about 95% of the market) whereas is mostly the scope for "leakages" (i.e., oriented in domestic activities. Therefore we do not expect circumvention of the measure, negative spill overs for the internal market. leakages to other financial sectors or to non-domestic institutions)? 4.3 Please assess the scope for None cross-border spill-overs of the applied measure (including a likely impact on the EU internal market pursuant to Article 133(12) CRD or 458(2) CRR) 4.4 When recognition is not N/A as this is an institution specific based measure. mandatory, please specify whether or not it is intended to ask for recognition of the measure by other Member States and provide the reasons 4.5 Any other relevant information, Capital conservation buffer and the counter-cyclical buffer will be including interaction with other introduced on 1 January 2016 following the CRD IV phase-in measures/policies arrangements. There are no G-SIIs in Greece. Miscellaneous 5.1 Contact person(s) at notifying Ioannis Tsikripis Maria Vergeti authority E-Mail : E-Mail : [email protected] [email protected] Phone Contact: 0030 210 Phone Contact: 0030 210 3205031 3205109 5.2 Intended date of publication of The intended date of activation is 1 January 2016, following a the measure and information BoG’s Executive Committee Act. This Act shall be published in the 5 about the communication Government Gazette of the Hellenic Republic few days following strategy of the notified measure the final decision. to the market 5.3 Any other relevant information - 6 ANNEX - Scores SIZE IMPORTANCE COMPLEXITY INTERCONNECTEDNESS BANK PRIVATE PRIVATE INTRA INTRA Total Score DOMESTIC CROSS CROSS DEBT ASSETS SECTOR SECTOR OTC FINANCIAL FINANCIAL PAYMENTS LIABILITIES CLAIMS SECURITIES DEPOS EU LOANS EU LIABILITIES ASSETS NBG 3.200 3.045 2.731 2.284 5.112 2.794 3.810 2.742 3.706 5.166 3.416 ALPHA BANK 2.062 2.429 2.189 2.402 1.790 2.742 1.663 1.144 2.067 2.155 2.064 ATTICA BANK 112 39 156 174 3 0 0 7 18 104 70 PIRAEUS BANK 2.530 2.094 2.907 2.908 555 1.857 2.392 2.715 1.607 1.172 2.150 EUROBANK 2.096 2.393 2.016 2.233 2.540 2.607 2.135 3.392 2.602 1.404 2.301 7 .